Financial planning is meant to be a year-round activity, but it often gets lost in the everyday shuffle. Like most, my financial planning has historically been done last minute. Once I see the leaves falling off trees and the outside temp starts to drop (or plummet if you’re in Vermont like me), I get the hint that winter is on its way and that means tax season is fast approaching. I always contribute as much as I can to the various retirement accounts that allow me to defer taxation. Every year the IRS mandated 401(k) contribution limits can change, so it’s important to know these limits.
The IRS has just released next year’s retirement plan contribution limits and not a lot has changed:
Individual Retirement Contribution Limits for 2016
| Plan Type | 2015 Contribution Limit | 2016 Contribution Limit |
| 401(k) | $18,000 | $18,000 |
| 401(k) Catch-Up >50 years old | $6,000 | $6,000 |
| Traditional IRA | $5,500 | $5,500 |
| Roth IRA | $5,500 | $5,500 |
| Traditional & Roth IRA Catch-Up >50 years old | $1,000 | $1,000 |
Deductible Income Limits: your income level determines how much of your retirement contribution you can deduct from your taxes. These income levels are set annually by the I.R.S.
Deductible IRA Income Limit: The income limit for taking a full deduction for your contribution to a traditional IRA while participating in a workplace retirement will stay the same in 2016 at $61,000 for singles and $98,000 for married filing jointly. The deduction is completely phased out when your income goes above $71,000 for singles and $118,000 for married filing jointly, the same as in 2015.
If you are not covered in a workplace retirement plan: The income limit for taking a full deduction for your contribution to a traditional IRA will go up by $1,000 in 2016 to $117,000 for singles and $184,000 for married filing jointly. The deduction completely phases out when your income goes above $132,000 for singles and $194,000 for married filing jointly, both up by $1,000 in 2016.
Roth IRA Income Limit: The income limit for contributing the maximum to a Roth IRA will go up by $1,000 in 2016 to $117,000 for singles and $184,000 for married filing jointly. You can’t contribute anything directly to a Roth IRA when your income goes above $132,000 for singles and $194,000 for married filing jointly, both up by $1,000 in 2016.
2016 403(b) contribution limits
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